Big Deal! Tesla And Reno Are The 2015 Winners

Nevada wins the most hotly contested economic development prize in years by bagging Tesla's lithium battery plant near Reno. Washington successfully pulled out all the stops to keep Boeing from leaving the state. Comcast's gleaming new tower will transform Philadelphia's skyline.

Tesla’s $5-billion Gigafactory—the most hotly contested economic development project in years—has earned the Economic Development Authority of Western Nevada (EDAWN) the Gold Award in Business Facilities’ 2014 Economic Development Deal of the Year competition.

The ground at a site in the Tahoe-Reno Industrial Park is prepared for the foundation of Tesla’s five million square foot Gigafactory, which will be one of the largest buildings in the world. (Photo: teslamotors.com.)

The largest lithium battery production plant in the world will rise on a site near Reno, NV, creating 13,614 direct and indirect jobs—with $1.6 billion in economic impact for the region—in the next two years alone [the projection for 20 years approaches $40 billion in direct impact and $100 billion in overall impact]. The plant is expected to create nearly $370 million in direct annual wages during the next 20 years.

Nearly 13,000 construction workers will be employed on the project and related development; about 3,000 of them already are busy building the 5 million-square-foot, solar-powered Gigafactory, which from the air will look like the largest mirror on Earth due to the photovoltaic panels that will cover its roof.

Overall, Tesla’s Gigafactory is expected to lift state employment by two percent and regional employment by 10 percent, a tremendous windfall for Nevada, a state that took one of the biggest hits from the housing market collapse in the Great Recession.

Landing Tesla’s mega-project was a team effort involving EDAWN, Storey County, the Governor’s Office of Economic Development and the City of Reno.

A DEAL THAT “CHANGES THE WORLD”

When the deal was announced in September, Gov. Brian Sandoval declared that the Gigafactory not only will be an advanced manufacturing game-changer for the region, but a development that will “change the world.”

“Tesla will build the world’s most advanced battery factory in Nevada, which means nearly $100 billion in economic impact to the Silver State in the next 20 years,” Gov. Sandoval said. “I am grateful that Tesla saw the promise in Nevada. These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world. Nevada is ready to lead.”

EDAWN President and CEO Michael Kazmierski called Tesla’s decision a “once-in-a-lifetime” event.

“Rarely in the world of economic development does a single event change a community so much, so quickly,” Kazmierski said. “This single event will move Reno-Sparks, as a metropolitan area, into the top 100. We will no longer be the ‘best kept secret’ as a great place to live, work and play. More projects will follow Tesla as they come to see the real Reno-Sparks.”

Just about every state in the Southwest, from Texas to California, threw its hat into the ring when Tesla founder Elon Musk announced that the electric carmaker’s new battery plant would be big enough to supply the entire automotive industry.

The state also has committed to approximately $100 million in infrastructure improvements to support the Gigafactory. NV will purchase the right of way needed to link Interstate 80 and U.S. Highway 50 to the plant site at the Tahoe-Reno Industrial Park in Storey County.

In return, Tesla promised that 50 percent of the employees at the new battery plant will be recruited from the local workforce. The company also has agreed to make a direct contribution of $37.5 million (beginning in August 2018) to K-12 education, as well as $1 million in funding for advanced battery research at UNLV.

Tesla has committed to invest $3.5 billion in manufacturing equipment and other property in Nevada (reportedly about a third of what the carmaker is planning to spend overall in the U.S.). The Gigafactory aims to produce 500,000 battery packs annually by 2020, employing more than 6,500 workers with an average wage of $25/hour.

Tesla’s initial five-year investment in the Gigafactory is expected to be augmented by an additional $5-billion expenditure for replacement equipment over the next 10 years. Scheduled to be operational by the end of 2016, the plant expects to achieve at least a 30-percent reduction in the production cost for lithium-ion batteries that will be installed in drones, toys and grid energy storage devices as well as electric cars. At full capacity in 2020, the plant will produce cells capable of generating a total of 35 gigawatts/hour of power annually and battery packs generating 50 gigawatts/hour per year.

“The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come. Together with Panasonic and other partners, we look forward to realizing the full potential of this project,” Tesla Founder, Chairman and CEO Musk said at the site selection announcement last fall.

HOW THE DEAL CAME TOGETHER

The fact that Nevada is home to one of the few active lithium mining operations in the U.S. helped its application for the Tesla project, but state officials said the key factor was the availability of land in northern Nevada for the mammoth facility, which requires a minimum of 300 acres and may eventually expand to cover 1,000 acres. In addition to the Industrial Park, Tesla initially was offered three other sites in northern NV to consider for the project, including the Reno Technology Park, the Reno-Stead Airport and a site in Fernley, NV.

The Nevada team also made the case that the Silver State’s logistics advantage would save the carmaker at least $300 million over 20 years. The team actually deconstructed a lithium battery and priced the shipping costs of each of its components to support this claim.

Prior to the Tesla deal, the record incentive package offered in Nevada was the $89 million deal given to Apple to put its data center in Reno. Reno, which bills itself as “The Biggest Little City in the World,” is busy planning a future beyond casino gambling: the city has laid down a marker that intends to be one of the leading high-tech hubs in the U.S.

Startup Row in Reno is a string of e-Commerce ventures that is drawing from an overflow of techies flocking to Apple’s new data center. One example is Zulily, an e-Commerce firm that sells home decor and women and children’s clothing, which is doubling the size of its warehouse and hiring 600 people. Reno also is vying to become a leading test center for drones.

To lure new high-tech ventures, Reno is emphasizing its proximity to Silicon Valley (the city is a four-hour drive from San Francisco) and the fact that NV has no corporate or inventory taxes. The seeds for a high-tech future were planted a decade ago, when a Microsoft licensing unit and an Amazon distribution center chose to locate in the Reno area.

Silver

When Boeing threatened to head down the runway and take off for another state, Washington steered the 777X and a new composite wing plant safely into its hangar.

Many cities are known as a “company town,” because of a decades-long affiliation between the location and an industry leader. Memphis and FedEx, Atlanta and Coca-Cola come to mind. Well, it’s not an exaggeration to call Washington a “company state”—and that company is the aerospace giant Boeing.

Washington faced its worst nightmare when Boeing threatened to move 777 production to another state, but produced a happy ending by retaining its core industry and landing a new composite wing plant. (Photo: pcmag.ru.)

When Boeing let it be known last year, in the midst of a contract dispute with the Machinist’s Union, that it was considering relocating its primary aircraft assembly hub from its longtime base in Everett, WA, nearly half of the states in the country eagerly put out the welcome mat. The stakes for Washington were enormous: Boeing and its supplier network in the state (the vast majority of the 1,350 aerospace-related companies are there to support Boeing) account for an estimated $76 billion in economic activity.

The launch of Boeing’s much anticipated update of its 777 jetliner arguably represented the single most significant economic development project in Washington State history. The twin-engine, twin-aisle workhorse has been built in Washington since its maiden flight in 1994 and has become the best-selling commercial wide-body of all time. The decision of where to build a new version of the 777X—and a facility to manufacturer its longer, carbon-fiber wings—literally meant life or death for the center of the WA aerospace hub.

With 56,900 jobs and $3.5-billion in annual wages hanging in the balance, Washington pulled out all the stops. In a nail-biting finish that came right down to the end of the runway, the state succeeded in landing the big prize, earning the Silver Award in BF’s Economic Development Deal of the Year competition.

Project Impact Estimates

Direct economic impact estimated at $14.4 billion annually

19,700 direct jobs, 9.400 indirect jobs, 27,800 induced jobs

Direct wages of $2.5 billion annually, $500 million in indirect wages

QUICK ACTION KEEPS WA IN THE GAME

When it became clear in the summer of 2013 that Boeing might look elsewhere as negotiations with the union bogged down, Gov. Jay Inslee and the WA Legislature sprang into action: in a special session called with two-days notice, the Legislature approved an extension and expansion of $8.7-billion in tax incentives for Boeing, an expansion of high-demand aerospace training programs at state community and technical colleges, and a specialized training program for composite-wing fabrication.

But just when the state thought it was safe for everyone to unbuckle their seat belts, the Machinist’s Union threw a monkey wrench into the negotiations by rejecting a contract that included significant pension givebacks. Boeing responded with what the politicians would call “the nuclear option”—the aerospace titan put the 777X out to bid; 22 states responded, outdoing each other with lavish offers, including at least one (Missouri) accompanied by a multi-billion incentives package pre-approved by the state legislature.

Seeing the handwriting on the wall, the Machinist’s Union capitulated, approving a new contract within hours of Boeing’s final deadline in January 2014. Washington won the 777X and Boeing’s new $1.3-billion Composite Wing Center. Production begins in 2017.

Bronze

A new $1.2-billion, 59-story tower, home to the Comcast Innovation and Technology Center, will transform the skyline of the City of Brotherly Love.

A crown jewel in the heart of downtown Philadelphia is Business Facilities’ Bronze Award winner in our 2014 Economic Development Deal of the Year competition.

The Comcast Innovation and Technology Center (CITC) is the largest private development project in the history of Pennsylvania. Developed jointly by two Pennsylvania-headquartered organizations, Comcast Corporation and Liberty Property Trust, this $1.2-billion, 59-story tower will become the dedicated home for Comcast Corp.’s growing workforce of technologists, engineers and software architects. With 1.7 million square feet in rentable space, the project will redefine Center City of Philadelphia as a thriving nexus of innovation and invention. The complex will feature:

Top-floor restaurant offering spectacular 360 degree views of the city

Studio and office operations of NBC 10/WCAU and Telemundo 62/WWSI

State of the art incubator space for local technology startups

RAPID GROWTH SPURS PROJECT

The deal was announced in January 2014 and by last summer construction already had kicked off.

Comcast’s gleaming new 1,121-foot tower will be the eighth-tallest building in the U.S. (and the tallest building between Chicago and New York). (Photo: culturesite.org.)

Comcast’s rapid expansion in recent years led to the company outgrowing its existing global headquarters, Comcast Center. In 2002, Comcast had about 800 headquarters employees in Philadelphia. By 2008, when the company moved into Comcast Center, the HQ workforce had grown to 2,900. Today, Comcast has about 4,800 HQ workers, maximum capacity for the Comcast Center (because of Comcast’s significant growth, many Comcast departments and functions are dispersed throughout several buildings in Philadelphia.

As a result, Comcast wanted to build a new Comcast Innovation and Technology Center—a world-class vertical campus.

Then-Gov. Tom Corbett, the Governor’s Action Team and the Philadelphia Industrial Development Corporation were motivated to act quickly and aggressively to show a long-term public commitment to one of the region’s leading employers. Public leadership worked furiously to secure the financial resources necessary for a deal that would help retain and expand Comcast jobs in PA as the media and technology company competes in national and global marketplaces.

Economic development grants from the Commonwealth of Pennsylvania and the City of Philadelphia amounting to $40 million were awarded to fund infrastructure improvements and upgrades to public spaces. In order to secure this public funding, at least $25 million of the grants were allocated directly to costs associated with the public improvement aspects of the project. Notably, construction of a concourse offering direct underground passage to the Southeastern Pennsylvania Transit Authority’s (SEPTA) Suburban Station was needed to provide connectivity to the new building. Public leadership agreed that enhanced, convenient public transit accessibility for commuters and visitors alike, was a project with significant public benefit that was worth funding. Public funds also were allotted to develop the plaza area, a public indoor Winter Garden and the widening of sidewalks and roads.

The Commonwealth of Pennsylvania and City of Philadelphia will both recoup their investment in the CITC project by the end of its construction. It is estimated that the $40-million investment will be recovered in full from the tax revenues generated during the construction period alone. A study by Econsult Solutions Inc., estimated that $67 million in tax revenues will be generated for the Commonwealth and $16 million in tax revenues will be generated for the City during the construction of the CITC.

Economic development officials knew that the implications of keeping Comcast a Philadelphia-centric company would be positive and far-reaching.

Project Impact Estimates

$1.187 billion one time, $503 million in annual direct economic impact.

1,500 annual direct jobs, 2,469 indirect jobs

$262 million in direct annual wages, $519 million in indirect annual wages

“The transformative investment Comcast has chosen to make with this project will have a strong impact throughout the region,” Gov. Corbett said of the historic project that will transform Philadelphia’s skyline. “The commonwealth’s partnership with Comcast will create more than 20,000 direct and indirect jobs during construction and at least 1,500 new Comcast positions.”

Designed by world-renowned architect Lord Norman Foster of Foster + Partners, the CITC tower will be located directly adjacent to Comcast Center. At 1,121 feet, the glass-and-stainless steel tower is slated for completion by the first quarter of 2018 and will seek LEED® Platinum certification. It will be the eighth tallest building in the United States—and the tallest building outside of New York City and Chicago.

Upfront economic activity during the construction period alone is estimated to generate $2.75 billion in economic activity within the commonwealth and $1.73 billion in Philadelphia.

In the commonwealth, the CITC and its spillover activity is estimated to generate $1.05 billion in expenditures annually. Through the development of the CITC, Comcast has also committed to create 1,500 new jobs. Including induced and indirect employment, ongoing operations are estimated to support approximately 4,000 total jobs and $447 million in earnings.

Honorable Mentions

Our judges singled out four projects—in our most competitive field ever of mega-developments and innovative deals—that deserve a tip of the hat in our annual awards showcase.

When Tennessee Gov. Bill Haslam and Volkswagen Group of America stepped to the podium to announce that the German auto giant would double down on its sole U.S manufacturing facility in Chattanooga, it was a red-letter day for the Volunteer State.

Volkswagen will add an additional manufacturing line and create the National Research & Development and Planning Center of Volkswagen Group of America. The total global investment for the expansion will be $900 million, with $600 million invested in Tennessee and 2,000 new jobs being created in Hamilton County.

“Today is an exciting day not just for Chattanooga and Hamilton County but for all of Tennessee, and I want to thank Volkswagen for its significant long-term investment in our state,” Gov. Haslam said. “The impact of this announcement goes far beyond the 2,000 new jobs because of the large multiplier effect of the automotive industry, and adding an additional manufacturing line and the National Research & Development and Planning Center sends a clear signal that Tennessee can compete with anyone in the global marketplace.”

The expanded plant in the Enterprise South Industrial Park will manufacture a new automotive line, a midsize SUV for the American market. Production of the new SUV will begin in the fourth quarter of 2016 with the first vehicle expected to roll off the new assembly line by the end of 2016.

“The United States of America is and will remain one of the most important markets of Volkswagen. Over the past few years, we have achieved a lot here. We are now launching the second phase of the Volkswagen campaign in the U.S. With the midsize SUV, the expansion of the Chattanooga plant and the new development center, we are focusing on the wishes of U.S. customers,” said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft.

Tennessee had to fend off fierce competition from several locations for the VW expansion, including a bid from Mexico.

SC: TIRE CAPITAL OF THE U.S.

Giti Tire, the 10th-largest tire company in the world, will establish its first North American manufacturing facility in Chester County, SC. The company plans to invest at least $560 million and create 1,700 new jobs over the next decade in order to meet the growing demand of the North American market.

Based in Singapore, Giti Tire will produce both passenger and light truck tires for the Original Equipment Manufacturer (OEM) and replacement markets in the Chester County plant. The new facility, which will be located on the Carolinas I-77 Mega Site, will combine manufacturing and distribution activities, with total building area estimated to be 1.8 million square feet.

During the first phase of production, the plant’s capacity is expected to be five million tires annually. Giti Tire plans to further increase production capacity in response to future market demand and conditions. The Chester County facility represents Giti’s ninth manufacturing plant in its global system. The company plans to break ground in Chester County in early 2015.

The company’s decision to locate in South Carolina was driven by a number of factors, including the area’s workforce and training opportunities through the technical college system, proximity to major transportation infrastructure, such as the CLT international airport and deep-water port facilities in Charleston, market access to the growing Southeast region and the state’s business-friendly environment. In order to assure the company of their decision to build in South Carolina and to assist them with any obstacles associated with building the company’s first facility in the U.S., the South Carolina Department of Commerce devoted a full-time employee to work with the Giti Tire and act as a liaison between the company, and the state and local governments. This decision was one of the major factors to help Giti Tire to close the deal with Chester County and South Carolina.

South Carolina Gov. Nikki Haley and Secretary of Commerce Bobby Hitt hosted the company in South Carolina on several occasions and took these opportunities to really get to know the Giti family and learn more about their business and its history. The Department of Commerce worked closely with local officials in the Chester County community, forged a new partnership with the I-77 Alliance, and also worked with the Charlotte Regional Partnership to close the project. Additionally, the Giti family spent several days touring the area in order to get to know the city, as well as the people.

The state awarded $37.8 million in grants to Giti Tire to aid the company’s start up. A $35.8-million Closing Fund grant will assist with land acquisition, site preparation and real property improvements, while a $2-million Rural Infrastructure Authority grant will assist with water and sewer access on the site. Additionally, the company will be eligible to claim job development credits once its committed job creation in the state is certified. Chester County also provided a property tax agreement (fee in lieu of tax) with the company for the next several years.

“This significant investment represents our strong commitment to customers in North America. This is a key milestone for Giti Tire and an important part of our growth strategy worldwide,” said Dr. Enki Tan, executive chairman of Giti Tire Group.

“This is another huge win for our state and Team South Carolina. We are the nation’s tire capital, and Giti’s decision is another great sign that our economic development efforts are paying off for the hardworking people of South Carolina,” Gov. Haley said.

A RECORD-BREAKING DEAL IN FL

In October 2014, Enterprise Florida, Inc. announced the state’s largest economic development project by net new job creation ever recorded in the history of the organization.

Navy Federal Credit Union’s recent historic announcement to create 5,000 jobs and a $350 million capital investment at its Pensacola campus is a game-changer for Florida. Navy Federal’s commitment comes from a long-standing relationship with Enterprise Florida that has facilitated an unprecedented number of jobs and capital investments in the state. Navy Federal’s expansion and unparalleled growth in Florida has proven to be a catalyst in positioning the state as a vital and thriving financial services industries cluster.

Navy Federal began operations in Pensacola in 2003 with 60 employees. Since then, Enterprise Florida has worked diligently with the Florida Department of Economic Opportunity, the Florida Legislature, the Executive Office of the Governor, Escambia County, and other economic development partners to encourage, facilitate and leverage additional business expansion plans and job creation opportunities for Navy Federal in Florida.

In total, Navy Federal plans to employ more than 10,000 workers and create $1 billion in capital investments in Florida as a result of aggressive and integrated economic development planning. Navy Federal is the world’s largest credit union with $60 billion in assets, five million members, 257 branches, and a workforce of over 12,000 employees worldwide. The credit union serves all Department of Defense and Coast Guard active-duty, civilian, and contractor personnel and their families.

At the onset of Navy Federal’s original expansion plans in 2002, Enterprise Florida positioned the state as the ideal region for the credit union’s business growth. The Virginia-based Navy Federal Credit Union selected Pensacola, FL, over Jacksonville—and its current headquarters of Vienna, VA—to be the site of its first remote customer contact center after a highly competitive selection process that included the support of Enterprise Florida, the Florida Department of Economic Opportunity, University of West Florida, the Greater Pensacola Chamber and Escambia County over an 11-month timeframe.

“This is our largest expansion in Pensacola thus far. It underscores what we’ve long been saying about this great community-it’s a great place to grow your business and a wellspring of talented people to employ,” says Cutler Dawson, CEO/President of Navy Federal. “Continued growth for Navy Federal not only signifies the strength of the credit union, but also means upholding our high standards for member services. It takes the best to serve the best, and that’s why we continue to invest in Pensacola.”

PLANO, TX GETS TOYOTA’S PRIZE

Plano, TX was on a list of 100 possible sites before Toyota Motor North America decided that the Texas city would be the new home of its North American corporate headquarters.

Toyota will be consolidating its manufacturing, sales and marketing, corporate and financial services headquarters to establish a unified “One Toyota.” The City of Plano and its economic development team pursued the relocation aggressively, along with the State of Texas. The state of Texas offered $40 million in incentives from its Texas Enterprise Fund, while Plano offered $6.75 million. Toyota received a tax abatement for 10 years and an unprecedented tax rebate for an additional 10 years.

Due to the scope of the project, the economic development team and the City of Plano, along with other municipalities and organizations, is providing six months of relocation assistance. City representatives traveled to Kentucky, California and New York to give presentations on the City of Plano and the DFW metro. In addition to these presentations, Toyota associates and family members will be coming to visit Plano in 55 waves in coming months. An expo is being held twice a week until March 2015 so that Toyota associates and family members can learn more about Plano and surrounding cities to determine their relocation decision.

In addition to the expo, Plano created a special welcome video for Toyota, along with tailored marketing collateral including community profiles translated into Japanese, welcome brochures and other quality-of-life pieces to showcase what Plano has to offer. Recently, the Mayor of Plano and city staff representatives made executive visits to Toyota Texas Manufacturing in San Antonio and Toyota headquarters in Japan.

“Plano was selected from a list of 100 possible sites largely for its great quality of life, cultural opportunities and proximity to transportation hubs,” Toyota North America CEO Jim Lentz said. “I’m confident that the talent pool in the Dallas area is as deep as anywhere in the country.”

Business Facilities congratulates all of the winners in our 2014 Deal of the Year competition. Nominations are now being accepted for future consideration here.

Picking The Winner

The 2014 Economic Development Deal of the Year recognizes the locations and economic development agencies that landed the highest-impact projects announced between July 1, 2013 and the entry deadline of December 1, 2014. For the purposes of this award, an “economic development deal” is defined as:

A project or effort that resulted in the relocation/expansion of a company to a location served by the entering organization;

A project resulting in the expansion of a company already within the territory served by the entering organization;

A project or effort that resulted in the demonstrable retention of a company that would have otherwise left, in whole or in part, the territory served by the entering organization;

Any combination of the above.

Nominees were required to provide official economic impact numbers produced by the RIMS II, IMPLAN or REMI certified analysis methods, including direct, indirect, and induced figures for economic output, job creation and capital investment when available, as well as anticipated new wages; and a narrative explaining how the deal came together, including details on regional cooperation, innovative incentives and training programs in partnership with higher education resources, where applicable.

Judges evaluated the narrative and the economic impact numbers and gave each project a score ranging from zero to 100. The highest-rated entry is our Gold winner and is considered our official Economic Development Deal of the Year; the second, third and fourth place entries win the Silver, Bronze and Honorable Mention awards, respectively. The awards were announced on our website, www.businessfacilities.com, in January.

Companies located in South Carolina’s Business Corner enjoy quick, easy access to both domestic and international markets, a plentiful and qualified workforce and it’s in a place where the cost of living and doing business are well below the national average. Learn more at www.nesasc.org.

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Business Facilities highlights area economic development and site selection news from around the world. Economic development creates opportunities to grow state, local and metro areas, which are essential for economic growth, improved quality of life and community development.

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